Should You Think About Buying Macfarlane Group PLC (LON:MACF) Now?

While Macfarlane Group PLC (LON:MACF) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the LSE over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Macfarlane Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Macfarlane Group

What is Macfarlane Group worth?

According to my valuation model, Macfarlane Group seems to be fairly priced at around 7.94% above my intrinsic value, which means if you buy Macfarlane Group today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is £0.97, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Macfarlane Group has a low beta, which suggests its share price is less volatile than the wider market.

Can we expect growth from Macfarlane Group?

earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Macfarlane Group's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? MACF’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on MACF, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 1 warning sign with Macfarlane Group, and understanding this should be part of your investment process.

If you are no longer interested in Macfarlane Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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